Your market update questions answered
Thursday, November 20th, 2008
MLC Investment Strategist Brian Parker provides answers to questions the panel didn’t manage to get to during last week’s webcast.
Watch this space for more Q&A from our panellists.
What in the market crisis today is different from the crash of 87?
The fall in share prices then happened much faster, and the recovery began sooner, although the recovery hit a snag quite soon in the form of the early 1990s recession.
The rise in share prices that preceded the 1987 crash was also much less soundly based. Prices had risen pretty much on ‘thin air’ – corporate earnings hadn’t risen anywhere near as fast as company share prices. This time round, the rise in prices was much more closely related to gains in company profits. However, the problem now is that the level of company profits doesn’t look sustainable – profits always tend to fall in even a mild recession, and markets seem to be factoring in just such a fall.
